Thursday, December 30, 2010

Ags Breakout - Potash Corp./Saskatchewan (USA) (Public, NYSE:POT)

MOO broke out of a two month base yesterday led by POT (second largest component of MOO, next to DE).

As discussed in my previous post, POT had carved out a multi-mth base and was setting up for BO. Unfortunately, I wasn't expecting it to move so quickly. But in reviewing the chart now, I see that the price/volume contraction on Monday and Tuesday foreshadowed an imminent BO.

Based on the size and quality of the base and weekly resistance, I am targeting $180 near-term for POT.

My initial entry and partial ($150 round number) were executed from my TWS iphone app using an area chart. I wish I had been home for this. Was relieved to get home in early afternoon to see a real chart.

This chart is one of the most perfectly orderly charts in my recent trading memory. Note that POT never made a lower low after the initial entry, until it failed to print red price bars on a new high shortly before my exit. Anyone trying to short, prior to that level was hurting pretty bad.

POT formed two ascending triangles on the way up, allowing participants who missed the initial BO, to jump in. Burn this chart to memory, it's a perfect example of momo in action.

May I ask where you set the initial stop after entry POT? I missed it because do not want to set the stop around 146.50. It is too risky to me. In some situation, the stock may pull back after the second test. what would you do if this happen after your entry POT. Will you give it a fix stop below BO price, for example $0.10? Or insist a stop just below support price, like pull back low at 146.50 in POT trade? Which plan do you think is better? Thanks a lot.

My initial stop was quite wide, because I was trading off of an area chart. I used $146.00 as my stop. But normally, I would use previous swing low.

The stop is a function of the timeframe. For a swing use PDL, for a day trade use previous swing low on 1 minute chart and previous bar low on 15 min. chart. For day trade, if you have a runner, bring stop to BE rather quickly. For example once POT proved it could hold above $148.00, move stop to BE. After taking partial, give the stock room to consolidate the early gains.